Esurance Courts Occasional Drivers with Innovative Pay Per Mile Program

Sean Cunningham by on Oct 22, 2015

Esurance is introducing a potentially revolutionary way for clients to buy insurance with Esurance Pay Per Mile. This mileage-based insurance offering is now available in Oregon and could expand nationwide if it proves successful.

The logic behind the Pay Per Mile plan is both simple and sensible: customers who walk or bike to work but still need a car can pay much more reasonable rates for their auto insurance. In the quest for a competitive edge, Esurance has targeted a subset of people that could be tempted to switch firms because of such a unique policy option.

Esurance is the first major firm to implement such a policy, but a smaller firm – MetroMile – bases its entire company on the concept of per-mile insurance. MetroMile is currently available in California, Illinois, Oregon, Pennsylvania, Virginia and Washington, and has made a niche for itself as the only per-mile insurance provider up to this point. Now, with Esurance also offering the service, more large firms will likely follow suit if it succeeds, directly challenging MetroMile.

The pay-per-mile service as a means of savings is interesting in comparison to other discount services. Traditional low-mileage discounts reward people who drive less than a predetermined total, which was a practical model before telematics technology. Now, both pay-per-mile and pay-as-you-drive models make the low-mileage discount look outdated, since they are able to offer discounts based on how or how much a user actually drives rather than predetermined targets.

Comparing the pay-per-mile and pay-as-you-drive models is a much more interesting exercise. Both utilize telematics, putting the prices directly in customers’ hands. The goal of a pay-as-you-drive program like Progressive Snapshot is to both encourage safer driving and less driving, while a pay-per-mile program just encourages less driving. The appeal of a pay-as-you-drive plan lies in a customer’s belief in their own driving ability; for drivers whose main priority is to limit their insurance cost, pay-per-mile will have a stronger appeal.

Portland is known for its bike lines and public transportation, making it an ideal place for Pay Per Mile

Esurance’s Pay Per Mile rollout in Oregon is very purposeful beyond the fact that it is one of the states where MetroMile currently operates. Portland is one of the better public transit cities in the country and has a reputation for its widely used bike paths, making Pay Per Mile an appealing option for many of the city’s residents. The idea of encouraging less driving is also appealing to people who are passionate about protecting the environment, a major motivation for instituting a bike culture. The state should be a good test as to the effectiveness and appeal of such a plan, and if it does succeed, look for Esurance to expand the plan into more states with similar public transportation culture.

Esurance is taking a risk by targeting such a specific demographic and encouraging clients to drive less with its pay-per-mile program, but in the continued effort to be ahead of the game, the firm could potentially steal away clients and reap the rewards of taking such a thrifty gamble.